The Naming and Shaming of National Minimum Wage

25 Sep 14 by Sarah Dillon
minimum-wage

In March 2014 the Department for Business, Innovation and Skills (BIS) published details of its new policy on enforcement of the National Minimum Wage (NMW) which included a revised scheme for naming and shaming employers, and increased the financial penalties to up to £20,000.

A worker or a third party can lodge a complaint with HMRC that the minimum wage is not being paid. HMRC are also targeting enforcement in key low-paying sectors. If HMRC determine that an employer has not complied with the requirement to pay workers the NMW they will issue a Notice of Underpayment.

Under the original naming scheme employers would only be publicly named if the arrears were over £2,000 (and at least £500 in respect of each worker) and met one of the “general criteria” for naming, for example if there was evidence that the underpayment was deliberate or that the employer had failed to keep adequate records.

The following penalties will apply to any Notice of Underpayment relating to a pay reference period beginning on or after 7 March 2014:

  • The penalty percentage is 100% of the underpayment
  • The maximum penalty has increased from £5,000 to £20,000
  • Where the amount of the penalty would be less than £100, the minimum penalty of £100 should be applied
  • Where this amount would be more than £20,000, the maximum penalty of £20,000 should be applied.

In February 2014, Vince Cable announced the first five employers named under the “name and shame” rules. Overall, the five employers owed workers a total of over £6,800 in arrears and have been charged financial penalties totalling £3,381.40. These were imposed before the increased financial penalties came into effect.

In June 2014 a further 25 employers were named and shamed. The companies named ranged from construction companies, schools, hotels, hairdressers, restaurants and nurseries. The media has also been very quick to pick up and publicise those employers who appear on the lists which causes embarrassment to the businesses involved.

If an employer is found to be underpaying employees, it seems that it will be very difficult for it to avoid the revised “naming and shaming” scheme. The employment status of staff such as apprentices, work experience people or directors can sometimes be uncertain. An employer must be very careful that it is not accidentally underpaying staff as this will not stop HMRC issuing a Notice of Underpayment and referring the employer to BIS for naming. If you are not sure whether the NMW applies to your employees then we would urge you to seek advice from you legal advisors to ensure that you are not “named and shamed” in the future.

For further information on this or any other employment issues please contact us on 0333 006 2929 or email info@esphr.co.uk.

 
Post by Sarah Dillon

Director, ESP Law Ltd

Sarah is a litigation expert with over 15 years’ experience. Sarah embarked on her career in employment law as an advocate for an employment law consultancy and continued as an advocate alongside being an employment law advisor for a plethora of reputable UK law firms including: DAC Beachcroft, Ward Hadaway and Richmonds Solicitors, where she was head of the employment department.